Glossary of Stock Trading and Investment Terminology

Non-Renounceable Rights Issue

A non-renounceable rights issue is when a company offers its shareholders the right to purchase more of the company's stock, usually at a discount to market rate. Compared to renounceable rights, the offer is not transferable to other parties and cannot be bought or sold. Issuing more shares of a stock dilutes the value of current outstanding stock on the market.

Price-to-Book Ratio (P/B Ratio)

The Price-to-Book Ratio or P/B Ratio is determined by dividing the current closing price of a stock by the book value per share of the latest quarter. P/B Ratio is termed as price-equity ratio too.

Interpreting the Price-to-Book Ratio

Base Metals

Base Metals refer to some of the common non-ferrous industrial metals that easily corrode or oxidise. Although they are not as expensive as the precious metals like gold, platinum or silver, base metals are considered as some of the most important items of today’s commodity market. Lot of people are getting more and more interested about trading base metals these days since this particular sector offers a lot of potentials for those who are willing to make profit from the price discrepancy of the commodities.

Bid/Offer Spread

The bid/offer spread refers to the difference between the bid price and offer price. To be more specific, it is the difference between the highest amount that a buyer is willing to spend for an asset and the lowest price/amount in exchange of which the seller is willing to sell it. “Bid price” is the selling price while the “offer price” is the purchase price.

For instance, if the bid price is $25 and the offer price is $26, then the bid/offer spread is going to be $26 - $25 = $1.

Bid/offer Spread- from the Perspective of the Stock Market


Alpha is a measure of stock performance adjusted based on risk. Alpha takes mutual fund volatility (price risk) and compares its risk-adjusted performance to a benchmark index. Alpha is the fund's excess return relative to benchmark index return.

One Cancels Other (OCO)

One Cancels Other (also known as OCO) is a kind of trading order that is formed by some conditional parts where execution of one part of the order automatically leads to the cancellation of the other part.

In case of the One Cancels the Other (OCO) order, the execution of one order results to the cancellation of another order. It means, an investor places two orders simultaneously and runs with the order that is triggered first.

Blue Chip

Blue chip companies are nationally known companies whose dividends are deemed to be reliable. Blue chip companies issue blue chip stocks, generally high priced but with low yield. Although blue chips are considered to be stable, some companies still fall beyond expectations, like telecommunications companies crashing during the years. Blue chip stocks are listed in Standard & Poor's ASX 20 with prices usually following the S&P500.

Hybrid Securities

Hybrid securities or 'hybrids' are a combination of two or more financial instruments. In general, hybrid securities combine the characteristics of both debt and equity. A common hybrid is a convertible bond. Convertible bonds feature the standard bond, but it is influenced by stock price movements into which it can be converted.

Borrowing to Invest

“Borrowing to invest” refers to borrowing money from a lender or financial institution to buy shares, bonds or managed funds. It is similar to taking out a mortgage to buy a house, land or any other property. This is a common practice among the investors and considered as an effective financial strategy as long as the entire procedure is managed properly. The whole idea of “borrowing to invest” is to invest more money in the market (stock market or managed funds) to increase profitability.

Annual Report

An annual report is an audited report that public companies are required to file. It details the preceding year's financial results and plans for the upcoming year. The document is available to shareholders and is released at the end of each fiscal year. In general, annual reports include financial data, audit report, management position, company information and data relevant to investors that is presented both in text and graphic form.

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